How do I handle force majeure and act of God clauses in commercial real estate leases?

It has become necessary to clarify the force majeure language to clearly define a governmental shutdown in act of God clauses, which allows tenants to reduce rents or terminate leases in exceptional circumstances. Pandemic clauses are rare, but they are an increasingly necessary safeguard for both sides in the event of another government ordered shutdown due to a virus. Landlords should refer to their attorney if they had an attorney draw up a lease. Tenants can speak to a commercial broker and/or attorney.

A commercial tenant should consider asking for a clause that reduces or delays the rent by a percentage if a space is unusable by law. Whether that reduction is 25%, 50% or 100% is subject to negotiations between the tenant and the landlord.

Have a waiting period before the rent reduction would apply. Waiting periods of 5-30 days are common. The clause should require that the tenant does not in fact use the space for any purpose during the period of any forbearance or forgiveness. This helps the landlord feel that the clause won’t be invoked unfairly while giving the tenant real protection.

Consider a landlord’s right to terminate the lease following a period of time up to 120 days, after the forbearance/forgiveness period begins. This right will require that the tenant decide within the time period whether or not to pay in full. This protects the landlord from the loss of revenue that another tenant would pay.

Meet the Expert

Viviana Writer is a real estate agent with Prosperiti Brokers in the Springfield, MO region providing buyers and sellers with professional, responsive, and attentive real estate services. Want an agent who'll really listen to what you want? Need an agent who knows how to effectively market your commercial or residential property so it sells? Prosperiti Brokers is a boutique brokerage with Midwest values and a national reach. The company mission is to help the communities they serve to prosper.